The Board also wants the state to better assess risk associated with such projects in the wake of the Route 460 permit problems

May 14, 2014|By Cathy Grimes, cgrimes@dailypress.com

The Commonwealth Transportation Board on Wednesday unanimously approved a resolution calling for better oversight, transparency and risk assessment on public-private partnership transportation projects in the state.

Secretary of Transportation Aubrey Layne proposed the resolution as a way to prevent a repeat of problems associated with the troubled $1.5 billion Route 460 project.

The resolution directs the Office of Transportation Public-Private Partnerships and the Virginia Department of Transportation to review all processes, policies and guidelines used to solicit, negotiate and implement such partnerships, called P3s and to more directly involve the CTB in the process.

“The CTB has no approval role as it currently stands in the P3 process,” Layne said on Wednesday at the board's monthly meeting in Charlottesville. “Neither does the legislature. It totally exists outside the normal procurement rules.”

Layne's proposal came after he briefed the board on the Route 460 project, a public-private partnership to build a new 55-mile road with tolls linking Suffolk to the Richmond area and providing better access to Interstate 95 for trucks from the Port of Virginia. Tolls were to be about 7 cents per mile for cars and about 21 cents per mile for trucks, according to state Highways Commissioner Charles Kilpatrick.

The project was to be funded by a combination of $904 million in state highway funds, $240 million in bonds and $250 million from the Virginia Port Authority. The CTB received a briefing on the project in 2012, but was not shown the contract nor told of its payment schedule.

The project had received initial approval from the Federal Highway Administration, and environmental permits usually follow such action. But the Army Corps of Engineers would not grant a permit for the new route because it affected more than 550 acres of wetlands in the path.

The state paid the contractor, US 460 Mobility Partners, $240 million on the project before Layne halted work and the monthly multi-million dollar payments in March while VDOT conducted new environmental studies of alternate routes. Additionally, VDOT has spent $43 million on the project, bringing the total to more than $280 million before any actual construction work began.

Layne said the high monthly payments, averaging about $19 million, to the contractor were a way to speed up preparations for construction.

“This road was being driven hard, and the administration wanted it as soon as possible, so that was a key negotiating tactic, to front-load the contract,” he explained. “Everything was geared up to get the project done as quickly as possible. … That push to get that road, that's where we find ourselves with this amount of money out of pocket.

“From a taxpayer standpoint, there is no good explanation for why we are here today.”

The Secretary said repeatedly that 460 Mobility had done nothing wrong. But he criticized the haste with which Gov. Bob McDonnell's administration pushed the project.

“The initial decision was driven by the executive branch. … There were extraordinary efforts made to get this contract closed,” he said.

In the process, all the risk associated with acquiring the environmental permit fell on the state, not on US 460 Mobility Partners. The company's only risk was associated with constructing the road and delivering it within the five-year deadline specified in the contract.

Board member Gary Garczynski said he did not remember such discussions between the administration, the P3 office and the CTB when the board was briefed on the project before approving funding for it in the state's six-year roads plan.

“The environmental issue is something I do not recall us reviewing,” he said during the briefing.

“The exact words were, the contractor had the responsibility for the permit, but did not have the risk for it,” Layne said. “I'm not saying it was intentionally meant to mislead. We thought the risk was with the contractor. It was not.”

VDOT now is conducting additional environmental studies of alternate routes, and Layne said the state expects to receive a permit for the project, but the route will be different and may not be a toll road.

He defended the decision to stop US 460 Mobility's work, noting that the contract called for the monthly payments to escalate to as much as $35 million, but no work could be done until the studies were finished and a new route determined. Layne said US 460 Mobility wants to continue work on the project if a permit is issued. He said the state should know what the proposed route will look like in September, and VDOT hopes to have the permit by December. But the risk remains.

“If in fact we do not get a permit … then this money is lost. Depending on the alignment and our ability to negotiate with the contractor, hopefully a lot of the money we can make good.”